Publication: Monitor Volume: 5 Issue: 218

While the sharp rise in world oil prices should boost Russia’s economy and federal budget, it may instead accelerate even further the country’s massive capital flight. According to a report issued by the Russian Finance Ministry’s Economic Expert Group, US$2.9 billion is now leaving Russia per month–up from US$800 million a month in the second quarter of this year. A total of US$8.6 billion fled between July and September of this year, the ministry said. Central Bank Deputy Chairman Viktor Melnikov, meanwhile, claimed that the flow of capital to offshore zones this year was half what it was in 1998, and that it had fallen to US$530 million and US$550 million during the past four months. The Finance Ministry, however, cast doubt on the Central Bank’s figures (Moscow Times, November 23; Russian agencies, November 22; see also the Monitor, October 27).

If the Russian Finance Ministry’s figures on are accurate, they suggest that the perception of political instability in Russia and its increasingly frosty relations with the West over the military campaign in Chechnya are taking their toll. Indeed, there have been fresh signals that the International Monetary Fund (IMF) will not release the next US$640 million tranche from its US$4.5 billion loan package to Russia any time soon. This tranche was to have been disbursed in October but was held up due to the Russian money laundering scandal. Yesterday U.S. National Security Adviser Sandy Berger said that Washington does not believe Moscow has met the economic conditions for further disbursal of IMF funding. Berger repeated a statement he made on November 20, when he said that Washington would assess the advisability of releasing IMF money to Russia based on overall U.S. national interest–specifically, on whether such funds would further “democracy and stability” in Russia (Associated Press, November 22). The comments were an indication that Washington may tie further loans to Russia’s behavior in Chechnya–a move which several leading Republicans have advocated. Berger’s comments contrasted with those of Viktor Khristenko, Russia’s first deputy prime minister, who was quoted on November 20 as saying that Russia’s Central Bank, Economics Ministry, Finance Ministry, and Fuel and Energy Ministry have all reported that they are in compliance with the conditions set by the IMF for the release of the US$640 million installment (Russian agencies, November 21).

In the meantime, a group of U.S. congressmen went to Moscow to discuss with some of their counterparts in the State Duma allegations that the Russian authorities misused past IMF credits–specifically, the US$4.8 billion released in the summer of 1998, just weeks before Russia defaulted on some of its domestic debt and devalued the ruble. The delegation of seven U.S. congressmen–headed by Curt Weldon, a Pennsylvania Republican–met with, among others, Viktor Ilyukhin, head of the Duma’s Security Committee and a radical communist deputy. Ilyukhin said there was a “frank” discussion of the issue of IMF credits and the positions of the Russian and American legislators coincided (Associated Press, November 22).

U.S. media this past summer reported that Western investigators were looking into whether several hundred million dollars from IMF loans were improperly diverted into accounts in the Bank of New York. Yuri Skuratov, Russia’s suspended prosecutor general, claimed that most of the US$4.8 billion disbursed to Russia in the summer of 1998 were bought up by major Russian banks at super low ruble exchange rates and siphoned out of the country.